Blockchain’s Role in Supply Chain Management

13 Min Read

To say that you’d have to be living under a rock to not have heard about blockchain in the last couple years might actually be an understatement. Blockchain technology is the driving force behind nearly every cryptocurrency in existence from Bitcoin to Ethereum down to the Shift Project.

Blockchain has already been put up on a pedestal as “the next internet” — despite having little to no adoption in the goliath industries it threatens to overturn. One of those goliath industries is supply chain management.

To understand why supply chain management is one of the leading applications for the blockchain, let’s take a quick look at the qualities of blockchain. Blockchains are/can be:

Immutable – meaning it’s unable to be changed or deleted after being created. Whatever is recorded will remain, uncensored.

Distributed – Are you aware that international shipping still uses a paper bill of lading systems? It’s incredibly outdated from an efficiency, ease of use, and is susceptible to a single point of failure like a fire. Data stored on the blockchain is stored across multiple nodes and available to be viewed via a block explorer from anywhere in the world.

Connected in a “chain” – Notice how supply chain management and blockchain have this in common? It’s a small hint showing how a series of historically “chained” together data can be followed throughout the life cycle.

Secure –Blockchains are amongst the most secure systems in the world. For the most reputable platforms the only real way to be hacked is form a user-error point of view, not a flaw in the technology.

Fast – Depending on the goals of the blockchain, data can be written almost instantaneously. And because it’s distributed and trustless it’s available anywhere in the world, without having to worry about being tampered with.

Easy to confirm – If you want to verify a transaction or data, just scan a QR or hop on the block explorer.

With those qualities in mind, it’s pretty easy to see that blockchain stands to be a really powerful tool for supply chain management. I didn’t want to stop at just “it’s pretty obvious this will be the future” so I connected with 6 leading blockchain / supply chain management experts to get a deep dive into this rapidly changing industry.

What’s the Future of Blockchain in Supply Chain Management?

Blockchain technology has the potential to make the supply chain more efficient, transparent and secure. An example of this can be found in transportation logistics. As businesses are becoming more dependent on global supply chains for goods and services, the freight and logistics industry play a more critical role. Currently, freight brokers control the industry and facilitate transactions of loads from shippers to carriers by adding a markup. This not only increases the costs for the carriers, but also of the downstream prices for the consumers. Another problem: Cargo theft costs companies approximately $30 billion per year. Since the nature of ownership is distributed, this means there is no one party that is accountable.

Blockchain can help solve these challenges of efficiency, transparency, tracking and security. By using smart contracts (that are automatically triggered when pre-defined conditions are met), it can eliminate or drastically reduce the role of intermediaries. As each step in the supply chain is completed, the documents are captured and shared so that all the participants can see what has been submitted, when they were submitted and by whom. International supply chains can receive huge benefits by implementing smart contracts and automated workflows. For example, blockchain can be used in fashion retail to track raw alpaca fleece from the farm all the way to the finished garment, thereby providing trust and transparency to the customer.

“The blockchain hype wagon will continue to careen forward as bitcoin values surge and questions about its efficacy make headlines.

Consequently, that hype will continue to drive a belief that blockchain is the hammer for every nail, screw, railroad stake or button-shaped problem. The number of times I’ve been asked to comment on how blockchain will revolutionize some industry or process that doesn’t need it is staggering.

To paraphrase the immortal words of Jeff Goldblum in Jurassic Park, “You were so preoccupied with whether you could, you didn’t stop to think if you should.”

Bio: Justin oversees both the Technology and Creative divisions at Janeiro Digital, where he pioneered the RADD methodology. He is also responsible for vision and strategy around Janeiro’s own technology initiatives, including the XFORM platform.

His background includes nearly two decades of experience building sophisticated technology solutions and bringing them to market. He is fluent in numerous programming languages, has extensive knowledge of enterprise application architecture, network infrastructure and protocols, distributed systems, and large scale data processing. He also invented one of the first systems to passively detect and identify sophisticated covert channels over a network.

“The blockchain is a perfect solution for a lot of supply chain issues. Imagine supply chain in a blockchain world.

Shippers and carriers discover each other without intermediaries, execute smart contracts to define any requirements, pay each other with crypto instantly and without transaction fees or risks, and track load movements (from warehouses to transportation – even temperature changes, tampering, damages, etc). Retailers place orders on the chain instead of EDI – which is so old it was originally designed for the Berlin Airlift; they manage recalls of dangerous food products as they reverse the supply chain.

All trading partners have access when they need it, have their modifications verified and confirmed – all on an honest, immutable ledger that nobody (and everyone) controls.”

Bio: Under Dan’s leadership, CaseStack has surpassed $200 million in revenue, been recognized as #1 in the Deloitte Technology Fast50, and made the Inc 5000 list of fastest-growing companies in America nine times. CaseStack is best known for its collaborative retailer logistics programs and cloud services technology applications.

Dan has held leadership positions at Procter & Gamble, Nabisco, Deloitte, and KPMG. He is a LinkedIn Influencer with over 380,000 followers, and he is the author of “Collaborate! The Art of We” and a speaker on the benefits of collaboration. Dan is currently developing a new division of CaseStack called SupplyPike with the expectation that it will spin off to become the leading cloud-based platform for supply chain professionals in the consumer goods industry. One of SupplyPike’s products is a digital freight marketplace that accepts bitcoin as a form of payment.

The future for blockchain is incredibly bright – the technology promises to provide immense supply chain benefits, giving early adopters a significant advantage over competitors.We see an immediate and lasting application for international shippers, carriers and logistics providers.

There are aggressive opinions on the positive effects on efficiency, transparency and cost reductions, however, those are still to be determined in practice. In the future, blockchain-enabled networks will also drive measurable improvements to critical metrics like total shipping costs, landed costs of goods, product quality and compliance.

At the highest level, blockchain generates this value by making it easier to move and track international shipments in real time, aggregate and share disparate data, and move away from paper-based processes and siloed systems, which are surprisingly still used in most back-end shipping and logistics processes today. The typical international shipment today includes at least five different parties and 20-something technology systems, few of which (if any) utilize fully digital processes. These processes make audits, dispute resolution and tracking incredibly complex and costly.

The future will bring a collaborative and immutable audit record and a trusted timeline of events across the supply chain. The results will deliver visibility for every party into exactly what happened, and when – boosting accountability and decreasing costly disputes.

When something is written to the blockchain, the information can’t be changed – no one can say, “I didn’t accept that delivery,” or “that product was damaged when it arrived,” or “we don’t have a record of that happening.” The blockchain will digitize, authenticate and protect critical data – creating a single source of truth, and a true representation of events, for everyone.

The benefit: Disputes and audits that used to take hundreds of hours to resolve, and cost hundreds of thousands to millions of dollars, will be solvable within minutes – saving every party a substantial amount of money and resources.

Blockchain-powered logistics networks also promise incredible risk mitigation, quality control and consumer protection benefits. For example, if a sensitive shipment – like a prescription drug or perishable food – falls below a safe temperature during transportation, IoT devices can record the event to the blockchain – providing a record of the issue for all parties involved and potentially triggering an alert to stakeholders.

Blockchain is moving from hype to implementation and the theories will become reality. Progressive and innovative organizations have moved beyond talk and are actively integrating the technology into supply chain and logistics networks today.

“Blockchain is both a sword and a shield. Every organization in the world is wrestling to fully understand and implement blockchain to ensure superior business solutions and to avoid being left behind, or even excluded, as new standards are established.

Supply Chain Management is no exception and stands to be the biggest beneficiary of this digital transformation of the speed, trust, and traceability of transactions. As a sword, blockchain removes cumbersome legacy systems and enables the real-time, immutable recording of transactions as exploding volumes of products zoom around the globe. This ledger lasts indefinitely, and its accuracy can be relied upon by any party, any time, anywhere.

Blockchain-centric systems track and link transactions with a simplicity previously unimaginable, which in turn opens up supply chains to new suppliers (such as smaller, organic farmers) globally. The information being exchanged transitions from being single dots of data that are continually collected, passed around, frequently lost and often forgotten, into being fully and accurately integrated into a secure, smart, automated system where all information is linked and activated.

Smart contracts are now being put in place which define vital decisions. Instead of old Joe keeping track of where the lettuce is, it is automatically tracked.

Alerts escalate as it sits at the port in danger of rotting, even when old Joe is on vacation, asleep or retired. Food spoilage, contamination, and health concerns during transportation will become a bad memory of the past. At the same time, clients can buy lettuce, knowing it is safe and organic.

Indeed, the previously hidden supply chain can be opened so customers, and even consumers, can readily check it. Just as some restaurant patrons love to see the food being cooked with their own eyes, a home chef can see the lettuce being cultivated, tested for safety, packed, transported, unloaded, tested again, and presented for sale. But while supply chain experts talk breathlessly about the warp speed at which blockchain can securely protect information, accelerate decision-making and compress vital timelines, brand implications are also enormous.

At the heart of marketing to consumers is loyalty and a trusted brand. Trust that took years to build can be irreparably broken in the blink of an eye. The nightmare of sponsoring child labor, inadvertently or otherwise, is a real possibility and it shakes consumers and companies to the core.

As a shield against brand destruction, we are now using blockchain to securely track cobalt in the Democratic Republic of Congo as it moves through every point in the supply chain – from mine, through manufacturing, eventually ending up on telephones and other products – so you can quickly confirm that the phone you use day and night has been responsibly manufactured. DLT’s supply chain product (“DL Asset Track”) eliminates most paper-based processes through smart contracts governing business rules, enables full transparency in supply chain, and dramatically reduces operating costs.

For supply chain management, the future is clear: it includes consumers demanding and obtaining transparent insights into the origins of anything they buy, and the real-time marriage of supply chain and marketing.”

Bio:Loudon Owen is Cofounder, Chair and CEO of DLT Labs, global leader in distributed ledger enterprise solutions powered by blockchain and passionate advocate of blockchain. DLT has the world’s largest team of blockchain designers and architects, has written more lines of blockchain code than any other company, and operates the largest active private Ethereum blockchain.

DLT has been involved in many crypto activities with its DL Wallet and DL ICO Plus, including Injii, Cashe, the Bombay Stock Exchange, the Dubai Stock Exchange and countless ICO’s. DLT is an IBM Authorized Business Partner, a member of its Global Blockchain Board of Advisors, and is the technical partner of many leading companies, as well as being an influential member of BiTA (Blockchain in Transport Alliance), Hyperledger and many other industry associations.

One of DLT’s products (“DL Asset Track”) eliminates most paper-based processes through smart contracts governing business rules, enables ful transparency in supply chain and dramatically reduces operating costs. DL Asset Track is being used to track cobalt in the Democratic Republic of Congo as it moves from mine, through the supply chain, and eventually ends up on telephones and other products.

As Managing Partner and co-founder of Canada’s first software venture capital fund, McLean Watson Capital, and a board member of numerous Canadian and international corporations, Loudon has played a leading role as both investor, executive and chief dragon-slayer with leading technology firms— notably, Skywave (one of the world’s leading logistics and telemetry companies, now Orbcomm); i4i Inc., which made legal history when it bested Microsoft in a US $300-million case that went all the way to the U.S. Supreme Court; and, Softimage which invented the world’s premier 3D animation technology, used in Jurassic Park and for Death Becomes Her, for which it received the Academy Award for Visual Effects.

Looking for more related to supply chain management? We’ve done a similar post asking leading experts about the future of logistics.

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About the author

Nick Hastreiter

I like to write about the future of different technologies and business models. With Future of Everything I approach this by interviewing founders, CEO's, and other game changers to share their vision for the future of their industry. Apply today to be a contributor (link on the menu at top)